Tariffs: MEI recommends Quebec consider other solutions before subsidies

Montreal, March 5, 2025 – The Quebec government should respond to U.S. tariffs by rethinking regulations, such as those creating interprovincial trade barriers, and by re-evaluating its tax burden, counsels an MEI researcher this morning.

“Before pulling out its chequebook, the Legault government has many other tools at its disposal that would be more effective in making Quebec’s economy more resilient,” says Gabriel Giguère, senior policy analyst at the MEI. “On the regulatory front, for example, Quebec should join the Canadian free trade area that Ontario and Nova Scotia are in the process of forming.”

Just last week, Nova Scotia premier Tim Houston introduced the Free Trade and Mobility within Canada Act.

If passed, the bill proposes to recognize the standards and training and to abolish the interprovincial barriers set out in the Canadian Free Trade Agreement with any province that adopts similar legislation.

Ontario Premier Doug Ford has already announced his support for this approach, and his government’s intention to evaluate the adoption of such a bill.

In its most recent ranking of provincial leadership in internal trade, the MEI identified 245 formal exemptions within the Canadian Free Trade Agreement. Quebec remains the province with the most trade barriers codified in the accord.

This kind of regulatory reform could lighten the load for Quebec companies and provide access to new markets, according to the MEI researcher.

“Reforming Quebec’s regulatory environment to reduce the burden on our businesses is a task that takes time, but that would be well worth the cost,” says Mr. Giguère. “While the Legault government should launch such a process, and quickly, emulating Nova Scotia’s approach to interprovincial trade would make a good first step.”

Another option, according to the researcher, would be to review Quebec’s tax system.

According to the most recent data available, taxes represent 39.7 per cent of the economy in Quebec, a percentage six points higher than the average for the rest of the country.

Most notably, the tax burden that corporations pay, as a share of the Quebec economy, is 53.5 per cent higher than the OECD average, and more than three times higher than in the U.S. This includes both corporate and employer-covered payroll taxes such as the contribution to the Health Services Fund.

“After the taxman has collected corporate and payroll taxes, Quebec companies have far fewer financial resources left to invest in their growth,” says Mr. Giguère. “If the government were less greedy at tax time, it would be much easier to attract new investment and grow our businesses.”

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The MEI is an independent public policy think tank with offices in Montreal, Ottawa, and Calgary. Through its publications, media appearances, and advisory services to policymakers, the MEI stimulates public policy debate and reforms based on sound economics and entrepreneurship.

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